185,000 savers fined £684 each for taking 'own money' out of account

Over 185,000 savers have been FINED for taking their own money out of ‘broken’ Lifetime Isa savings accounts. More than 185,000 savers have been fined a combined £127million for taking out their own money from their ISAs, figures show.

Stats have revealed that Lifetime ISA (LISA) holders have been charged penalties of £684 each on average. The research was conducted by mortgage lender MPowered Mortgages, which submitted a freedom of information (FOI) request to the government.

Stuart Cheetham, chief executive officer said: "LISAs were created to help first-time buyers save up to buy a home, but thousands of savers are being unfairly penalised each year for doing just this. The LISA withdrawal penalties are designed to ensure savers only use these accounts for what they are designed for - buying a first home or saving for retirement - but the cap on the value of a property they can be used for means LISAs are increasingly unfit for purpose."

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Stuart added: "Forget reheating the failed Help-to-Buy scheme or tinkering with stamp duty, the next government should act fast to reform the outdated LISA rules. While the LISA withdrawal restrictions are well-intentioned, the property price cap needlessly penalises some savers for accessing their own money - it should be index-linked to reflect the rising tide of house prices."

James McCaffrey, spokesperson for TotallyMoney, told The Sun: "The issue here is that nobody would have predicted the pandemic and the cost of living crisis which followed — including those who opened a Lifetime ISA. House prices across the country have also risen dramatically.

"This has led to 185,000 LISA savers being fined a massive £127million — some, you’d assume, through no fault of their own. For these people, the system is broken, and it’s clear that LISAs have failed to keep up with social and economic change.

"If a government brings in glitzy new policies, it has a duty to make sure they’re fit for purpose — and that they stay that way. And people shouldn’t be punished for the failure of the system."